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EC ACTS TO IMPROVE FINANCIAL CONTROL OF STRUCTURAL FUNDS

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Effective control of the structural funds is vital for ensuring that they provide value for money. To improve the f...
Effective control of the structural funds is vital for ensuring that they provide value for money. To improve the financial control of the funds, the European Commission has adopted a regulation laying down minimum control standards to be applied by the member states. The purpose is to make sure that the member states know their responsibilities when it comes to enforcing financial control of the structural funds. In addition the commission was presented with internal guidelines on the application of financial corrections for irregularities which result from member states' failure to apply adequate financial controls. These measures form part of the commission's SEM 2000 (Sound and Efficient Management) initiative.

In the regulation adopted recently, under Article 23.1 of Regulation (EEC) 4253/88, (the so-called Coordination Regulation) the commission sets minimum standards for financial control by the member states by specifying:

-- overall objectives for financial controls (including an adequate audit trail)

-- a minimum percentage of programmed expenditure to be covered by controls

-- regular co-ordination with the commission on control programmes and methodology

-- the provision of a control statement at the final closure of each programme

-- an annual report on the application of the regulation

The commission has emphasised that it has no intention of imposing major institutional or organisational changes on the member states. The majority of member states already have regular meetings with the commission's financial controller which can be used to discuss how best to implement the regulation in accordance with each member state's national system.

The second measure is a set of internal guidelines for the commission's services in applying net financial corrections under Article 24 of Regulation 4253/88. In the structural funds the normal presumption is that, if an irregularity is detected, the member state may substitute such a non-eligible project with another one within the programme approved by the commission. The guidelines specify the circumstances where the commission considers that this possibility of substitution should be denied ( and that 'net' corrections should therefore be applied). The main criterion proposed is that a net correction should be made where there has been a significant failure in financial control in the member state. In the case of systematic failure there may also be flatrate corrections which go beyond the individual net correction.

Background

The unacceptable level of errors and irregularities found in expenditure in the member states co-financed by the structural funds has been the subject of adverse criticism in recent reports by the European Court of Auditors and the European parliament.

The European Council in Madrid in December 1995 asked the commission and the Council of Ministers to consider extending the clearance of accounts procedure used for agricultural guarantee expenditure to other sectors, notably the Structural Funds. Under this procedure Member States are obliged to repay EU finance for expenditure which has been subject to irregularities.

This subject was considered last year by the SEM 2000 Personal Representatives Group (a group composed of personal representatives of the Ministries of Finance of the member states) chaired by commissioners Anita Gradin responsible for Financial Control and Erkki Liikanen responsible for budget and personnel. In the group's report to the European Council in December 1996 the majority shared the commission's view that it would not be right to apply the agricultural system in all its details to the structural funds. However it was agreed that financial control requirements and financial corrections procedures in the structural funds regulations needed to be clarified. This is the aim of the commission decision.

The commission is also examining how the financial control could be improved further during the next structural programming period from the year 2000. It will be making detailed proposals in the new year in the context of Agenda 2000.

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